Once you’ve found a property you love, it’s time to make an offer. But not too fast! There are steps to follow first.

Depending on whether your offer is conditional or unconditional, you may need to provide your lawyer and lender with the following documents, so everyone involved has assurance that there are no nasty hidden surprises.

LIM Report

A Land Information Memorandum (LIM) is a report prepared by the local city or district council at your request. It provides a summary of the property information held by the different departments at the council such as records of stormwater or sewerage drains, any rates owing on the land, permits and building consents.

A LIM report can give you an out if it uncovers any potential issues such as flooding instability, and other natural hazards.

Building inspection report

A building inspection is carried out by a qualified and insured inspector. The purpose of the inspection is to identify any significant faults as well as future or urgent maintenance issues caused by gradual deterioration, for example, rotting weatherboards, areas where there is dampness or mould and structural issues.

Depending on what a building inspection finds, you may be able to use this report to help you negotiate with the seller over price or repairs.

Valuation

A property valuation is an assessment undertaken by a registered property valuer to determine the value of a property based on the current market, recent sales, council information, size, and condition of the property. A property valuation is done when you’re buying or selling a property and is often a condition of finance that lenders require when you apply for a mortgage.

It’s important for you, as a home buyer, and your lender, to have the assurance that the property you want to buy is worth what you are planning on paying for it.

Once your offer has been accepted, you’ll receive a sale and purchase agreement which will contain all the important information about the property sale e.g. the price, conditions, and settlement date (which is the date by which you must have everything finalised).

You and your professional team will now work towards preparing everything you need to meet the conditions before a sale can become unconditional.

Understanding the sale and purchase agreement

A sale and purchase agreement is a legally binding contract between the buyer and seller, and you cannot buy or sell a property in NZ without both parties signing the agreement. It sets out all the details, terms and conditions of the sale, including price and the settlement date. Every sale and purchase agreement has different conditions, so you must read the agreement carefully before signing.

This is where your property lawyer comes in handy. Sale and purchase agreements can be filled with technical jargon, so have your lawyer review the agreement before signing it. They can also communicate with the seller’s lawyer to ensure the conditions are fair.

You will also need to share a copy of the signed Sale and Purchase agreement with your lender. The lender will need to understand the property conditions, terms, purchase price and settlement date before they can finalise your home loan.

The sale of the property becomes unconditional when the buyer, seller and your lender agree on all conditions.

What’s in a sale and purchase agreement?

Although the conditions and clauses may vary, every sale and purchase agreement includes the following:

• Names of the buyers and sellers
• Title number and legal description of the property
• Type of title (e.g. cross lease, freehold or leasehold)
• Agreed price
• Deposit and interest on overdue payments, if applicable
• Chattels included in the sale (lighting fixtures, curtains etc)
• Conditions specific to buyer and seller and how many working days to fulfil them
• Settlement date (the date you will finalise payment and become the new homeowner)

Once you sign the sale and purchase agreement, you must meet the set conditions. Failing to meet these conditions will result in extending the settlement date. If this happens, you will need to compensate the seller and pay interest.

• WHILE YOU'RE HERE:

• Read more about New Zealand Residential Property Sale and Purchase Agreements here.

You’re nearly there!

Before your offer can become unconditional, you will need to apply for full loan approval for your chosen property. Even if you have conditional pre-approval, your lender will need information about the property and other documentation before confirming the home loan.

Apply for an unconditional loan

Unconditional approval means that a lender has taken the time to formally assess all your paperwork and has decided to offer you a home loan based on the property you have chosen to buy.

Submit an unconditional letter of offer

Once you have provided the lender with all the documentation they require and all conditions have been met to their satisfaction, you should receive an ‘unconditional letter of offer’. You must then pass this on to your solicitor who will, with your approval, confirm to the seller’s solicitor that all conditions have been met.

Pay your deposit

Depending on your sale and purchase agreement, you may pay the deposit when the agreement becomes unconditional – usually by electronic funds transfer. If the sale is by tender, you provide this when you make the offer.

If you are using KiwiSaver savings towards your deposit or purchase price, you’ll need to work with your solicitor to complete and submit your KiwiSaver first home withdrawal application.

We recommend that you submit your applications at least 15 business days before payment is due.

Interest on a home loan is typically calculated daily and then charged to the borrower within the agreed payment frequency e.g. if you are making fortnightly payments, interest is charged to the loan with that payment.

The interest rate charged will depend on your specific situation and the following can affect your rate:

• The total amount you can afford to borrow
• The number of years in your loan term
• Your financial situation (borrowers with a high credit score may receive a lower interest rate)
• Your deposit amount

At Unity we offer both fixed and floating interest rates.

Fixed home loan interest rate

With a fixed rate home loan the interest rate you pay is fixed for a set term, which could be anywhere from 6 months to 5 years depending on your lender. At the end of the term, you can choose to re-fix again for a new term at current interest rates or move to a floating rate.

Advantages:

• You know exactly how much each repayment will be over the term
• Lenders often offer fixed rate specials to remain competitive
• You can lock in lower rates if market interest rates are rising

Disadvantages:

• Fixed rates often have limits on how much extra you can add to your repayments without incurring charges
• If you take a long-term loan, there is a risk floating rates may drop below your fixed rate
• If you choose to sell your property and/or break a fixed loan you may be charged a ‘break fee’

Floating home loan interest rate

Floating rate loans can change as interest rates in the wider market change, normally linked to the Official Cash Rate (OCR). This means your repayments may go up or down.

Advantages:

• You have more flexibility to make changes without penalty, such as increasing your repayments so you can pay off the loan early
• You can apply for a home loan top-up without incurring a break fee
• You can take advantage of decreases in interest rates

Disadvantages:

• Floating rates have historically been higher than fixed rates
• When rates go up the repayments also go up, which could put a squeeze on your budget

• Hot Tip!

• You can change from a floating rate to a fixed rate at any time.